As a full-time farmer, practicing small animal veterinarian, board member of U.S. AgBank and the Farm Credit Council, Schenk noted that under the FCA’s current regulations, his access to the Farm Credit System is limited because he generates a significant portion of his income from off-farm employment.
With 92 percent of America’s farm households earning the majority of their income from off-farm sources in 2001 according to the USDA, Schenk’s situation is typical of modern U.S. agriculture.
Schenk and nearly a dozen others testified on behalf of the customer-owners of the Farm Credit System at a hearing called by FCA to explore potential changes to regulations governing the eligibility and scope of financing for Farm Credit System lenders.
Among other reasons, FCA held the public meeting to explore how their regulations can become more responsive to the needs of all eligible and creditworthy farmers and rural residents within the boundaries of the Farm Credit Act.
“The majority of farm households in rural America derive the majority of their income doing things in addition to farming,” said Kenneth Auer, president and CEO of the Farm Credit Council. “The real issue for this hearing is how must FCA’s regulations be revised so the Farm Credit System can fully meet its mission of helping to improve the income and well-being of all types of agricultural producers.
“Regulations should not place artificial restrictions on a farmer’s ability to get credit from the Farm Credit System.”
Auer said that Congress made its intent clear in the Farm Credit Act, directing the Farm Credit System “to provide for an adequate and flexible flow of money into rural areas. Is it consistent with this congressional directive for FCA regulations to limit the System’s ability to meet the full credit needs of eligible farmers, ranchers and commercial fishermen?
“Congress clearly authorizes the System to meet the other credit needs of producers, and we see no reason for the Agency to impose restrictions on this authority,” he noted. “When the System brings capital into rural America and supports employment-generating enterprises, it is directly contributing to that flow of money into rural areas that Congress highlighted in the language of the Act.”
Schenk and Auer referenced USDA data that indicates almost 55 percent of all U.S. farm operators also work off the farm and 80 percent of these individuals work at full-time jobs; the incidence of off-farm employment was higher among young farmers than the population of farmers in general; and that between 1969 and 1999 the number of farm operators who were self-employed in off-farm businesses increased by almost 60 percent and the number of self-employed farm spouses increased by 95 percent.
“These facts are evidence of how important off-farm income has become to the majority of agricultural producers in this country,” Schenk said.
“Congress did not direct that farmers be limited in obtaining credit from the Farm Credit System for other needs, and we see no reason for FCA to arbitrarily adopt such a limit,” says Auer. “Agriculture, the structure of farming, and the other financing needs of agricultural operators are too diverse for one policy that will make sense nationwide.
“A rigid policy addressing this results in the Agency limiting the System’s ability to fulfill its mission. We suggest that it be left to the boards of directors of System institutions to establish their lending policies. They have the responsibility to provide guidance to their staff knowing their ability to analyze the risk associated with various credits and their institution’s capital position. We just ask that you permit the Farm Credit System to operate consistent with the plain language of the Farm Credit Act.”
Note: Copies of Schenk’s and Auer’s testimony can be seen at www.fccouncil.com.